FTC Implements Ban on Fake and AI-Generated Reviews, Effective October 2024

Washington, D.C., 13 October 2024 – The U.S. Federal Trade Commission (FTC) has announced a significant shift in online consumer protection with a new rule targeting fake and AI-generated customer reviews. Effective from 13 October 2024, this rule extends beyond curbing deceptive product reviews, encompassing restrictions on the purchase and sale of followers and views on social media platforms.

The rule's journey began nearly two years ago with an "advanced notice of potential rule making" in November 2022. It then progressed through various stages including a public commenting period in February 2024, before being finalised in August.

FTC Chair Lina M. Khan emphasised the importance of the rule in a public statement: “Fake reviews not only waste people’s time and money but also pollute the marketplace and divert business away from honest competitors. By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive.”

Comprehensive Scope of the FTC Rule

The newly established rule presents a thorough approach to both consumer and business practices related to online reviews:

1. Ban on Fake or Misleading Reviews and Testimonials:

  • The rule outlaws testimonials purportedly from non-existent individuals and targets AI-generated reviews.
  • It forbids reviews and testimonials from individuals without genuine experience with the business or its products.
  • Misrepresentation of testimonial experiences is prohibited.
  • Businesses are banned from creating or purchasing fake reviews or testimonials. They are also barred from disseminating information they knew or should have known was fabricated or misleading.

2. Prohibition on Buying Positive or Negative Reviews:

  • Businesses are prohibited from offering compensation or incentives for reviews that express a particular sentiment. The language or sentiment must not be influenced by such incentives.

3. Insider Reviews and Testimonials:

  • The rule restricts testimonials and reviews provided by company insiders who do not disclose their connection to the business.
  • It prevents businesses from publishing testimonials from employees, managers, or their immediate families unless appropriate disclosures are made.

4. Misrepresentation of Review Websites:

  • Businesses are prohibited from misrepresenting controlled entities as independent review sources. Any site offering reviews must not falsely present independence if it includes reviews of the business’s own products.

5. Review Suppression:

  • The rule aims to protect consumers who post negative reviews from any form of retaliation, including legal or physical threats and intimidation.
  • Businesses cannot falsely declare that their review section includes all submitted reviews if negative reviews have been removed or suppressed.

6. Misuse of Fake Social Media Indicators:

  • The purchase or sale of fake followers or views - such as those generated by bots or hijacked accounts - is banned. This measure applies where the buyer knew or should have known the indicators were artificial and misleading for commercial gain.

Implications for the Marketplace

Online reviews have become pivotal for consumers making informed purchase decisions, from everyday goods on Amazon to specialised B2B software. However, the prevalence of fake reviews has skewed market perceptions, leading to misled consumers and unfair competition.

Lina M. Khan’s statement underscores the FTC’s commitment to curbing deceptive practices and fostering a fairer marketplace. Upon the rule’s enactment, the FTC will be equipped to impose civil penalties on violators, augmenting its previously limited enforcement capabilities.

While this rule represents a robust move against the manipulation of online reviews and social media influence metrics, it primarily covers activities within U.S. jurisdiction. Thus, the global issue of fake reviews remains partially addressed, especially since many deceptive reviews originate from beyond U.S. borders.

The implementation of this rule marks a significant milestone in the fight against fraudulent online practices, aiming to restore trust and integrity in digital consumer interactions. The FTC's strengthened measures seek to ensure that the voices of genuine customers are heard, ultimately supporting a more honest and transparent marketplace.

Source: Noah Wire Services